Wednesday, July 29, 2009
foreign vs euro vs global bonds
A foreign bond (called Yankee bond in the US, Samurai bond in Japan, Bulldog bond in the UK) is a bond issued in a country's national bond market by an issuer not domiciled in that country where those bonds are subsequently traded. Regulatory authorities in the country where the bond is issued impose rules governing the issuance of foreign bonds. Issuers of foreign bonds include national governments and their subdivisions, corporations, and supranationals (an entity that is formed by two or more central governments through international treaties). They can be denominated in any currency. They can be publicly issued or privately placed. Eurobonds have the following features: underwritten by an international syndicate. offered simultaneously to investors in a number of countries at issuance. issued outside the jurisdiction of any single country. Therefore, they are not registered through a regulatory agency. in practice they are typically registered on a national stock exchange. Why? Some institutional investors are prohibited from purchasing securities that are not registered on an exchange. The registration is mainly intended to overcome such restrictions. However, most of the Eurobond trading occurs in the over-the-counter market. Make coupon payments annually. Types of Eurobonds: There are a large variety of Eurobonds with different features. For example, deferred-coupon bonds, step-up bonds, dual currency bonds, etc. If an Eurobond is denominated in US dollars, it is called Eurodollar bond. Example: A US$ bond issued by Ford and sold in Japan. "Plain vanilla", fixed rate coupon bonds are called Euro straights, which are unsecured bonds. A global bond is a debt obligation that is issued and traded in both the USYankee bond market and the Eurobond market. Issuers of global bonds typically have high credit quality, and have large fund needs on a regular basis. The first global bond was issued by the World Bank. Example: A US$ bond issued bythe Canadian government, and sold in the US and Japan.